Management Talent Leaving in Droves for Private Equity

Bill Sjostrom —  19 February 2006

According to this Business Week article, top managers are fleeing public companies for jobs with private equity funds to hunt for deals, head portfolio companies, or both.

The attractions are twofold: money and freedom. The pay can be outrageously good even at the entry levels; for CEOs, it can be spectacular. The flexibility is alluring, too. In private equity there’s less annoyance from the Sarbanes-Oxley Act, the controversial regulations passed in 2002 to police publicly held companies. And many private CEOs will avoid the Securities & Exchange Commission’s new proposal that would require the highest-paid executives at public companies to disclose their compensation in excruciating detail. (These rules and proposals still apply to companies that issue registered public debt.)

Regulatory issues aside, the fundamental nature of private-equity work is different. CEOs have a freer hand to do the tough but necessary things to repair companies for the long term, with less focus on quarterly results and placating public shareholders and more on meeting the strategic yardsticks of a multiyear turnaround effort.

Looks like we should add contributing to public company executive brain drain to the list of possible SOX and executive pay disclosure costs.

One response to Management Talent Leaving in Droves for Private Equity


    It is disappointing that you give such short shift to a serious piece.

    If one even looks deeper into the article, one finds that other darker forces may be at work

    Later in the piece, one finds:

    “Some business thinkers, like management professor Michael Useem at the University of Pennsylvania’s Wharton School, see the exodus as a sign that the ascent of widely held companies over the past century might be cresting. With capital in fewer hands, there are fewer checks and balances coming from other stakeholders on how that capital is deployed.”

    In sum, private equity may really be the effect of the income gap, Bush’s tax cuts, etc.

    To say its SarBox is …